EU EXTERNAL AID

1. EU EXTERNAL AID Raul Mateus Paula March 2003

2. European Union’s external assistance • Commitments in 2002 : 10.2 € billionè3.5 times the amounts committedin 1989 (EuropeAid’s portfolio + Humanitarian Assistance + Pre-accession instruments + CFSP + Rapid Reaction Facility) • 10% of ODA (Official Development Assistance) èdoubling in 15 years(in 1985, the Commission was responsible for 5 % of ODA) • The Commission is ranked third after the United States, Japan, Germanyand France • The Commission is the largest donor of humanitarian aid (ECHO)

3. The division of the responsabilities Division of Responsibilities • EuropeAid is responsible for the project cycle from identification through implementation • DG Relex and DG Dev are responsible for the pluri-annual programming Mettre en oeuvre l’ensemble des instruments d

4. EuropeAid organization Indicative Programming Identification Evaluation Implementation Formulation Financing The six stages of the Project Cycle today

5. Project cycle phases Project cycle phases • Programming Analyse situation to identify problems which development co-operation could address • Identification Identify project ideas and screen them for further study • Formulation Develop relevant project ideas into operational project plans • Financing Commission decides to fund project and agrees arrangements with beneficiary country • Implementation Mobilise and execute project • Evaluation Assess project achievements and identify lessons

6. Project cycle phases Financing phase

7. Project cycle phases Implementation phase • Award contract(s) to implement projects • fair competition • transparency • Manage execution of projects

8. Project cycle phases Procurement rules applicable to EC external aid • Specific rules for projects in the interest of beneficiary countries • Directives and WTO rules if the projects are in the interest of • the Commission; or • both the Commission and beneficiary countries

9. Project cycle phases EC external aid contracts • Commission ‘for and on behalf of’ the Government of a beneficiary country • ‘Provisions applicable to external aid’ laid down in the new Financial Regulation and Implementing rules • Commission “must comply with the basic principles adhered to by the Union in the field of public contracts, particularly for the Directives” Committee of Independent Experts

10. Project cycle phases Manual of Instructions • Adopted by the Commission on 10/11/99 after 3 years of consultations with the market and representatives of the EU Member States • negotiated with Member States • warmly welcomed by consultancy organisations • commended by Transparency International

11. Project cycle phases Impact of Manual of Instructions • Before: • 46 different contract procedures between the EC external aid programs • different Web sites with different presentations and information content • After: • 8 contract procedures for all EC external aid programs • unique Web site

12. New financial regulations (FR) and Implementing Rules (IR) EuropeAid • In 2002, we have had important concertations with the Commission Horizontal Services ( DG Budget, Legal service, Olaf Financial control, DG Relex, DG Enlarg, DG Dev …) on the new Financial Regulations (FR) and Implementation Rules (IR ) • The main objective was to preserve the External Relations Specificity's

13. Budget challenges EuropeAid - the current challenges Among the current challenges • Update the Manuel of Instructions to comply with the new Financial Regulation (FR) and Implementing Rules (IR) ; • Update the Practical Guides for Budget ; • Update the “Budget” Internal Financial Guide to take into account the new FR and IR;

14. Challenges Calendar / Schedule • The Financial Regulation applies as of 01/01/2003; • In order to allow the revision of the Manual of Instructions and the Practical Guide, as well as the exchange of letters with the beneficiary countries and the budget internal financial guide, a transitional period of 5 months was given to EuropAid by European Commission (end : 31/05/2003) ; • During this period the standard documents for Tender Dossiers and contracts available in the Practical Guide are used, except for the budgetary commitments corresponding to the financial decisions taken by the Commission after the 01/01/2003 ; • For the budgetary commitments after the 01/01/2003, the new (to be revised ) procurements procedures as well as the new standard contracts should apply

15. Modifications The most important provisions • Among the most important provisions resulting of the new financial regulation, it is worth to underline : ARTICLE 166 § 2 : Three Provisions a. Rule N + 1The financial agreements have to be signed at the latest one year after the budgetary commitment (financial decision of the Commission ) b. Rule N + 3The legal commitments (contracts) have to be signed at latest three years after the budgetary commitment (financial decision of the Commission) c. The first payment has to be made at the latest three years after the signature of the contract. These provisions don’t apply for AUDIT and EVALUATION • These rules apply to all the budgetary commitments made after 01/01/2003

16. Modifications The most important provisions • What happens with the budgetary commitments (financing decisions ) made before 01/01/2003 regarding ARTICLE 166 § 2of the new financial regulation ? - The above mentioned provisions don’t apply - The previous financial regulation applies where the financing agreements indicated the contracting and implementation period, with possibility for addenda ; • However :If any of the financial agreements related to the budgetary commitments made before 01/01/2003 is subject to an addendum with budgetary consequences, the provisions of ART. 166 § 2 of the new financial regulation will apply automatically.

17. Modifications Consequences of the new provisions • What will be the consequences of these new regulations ? - These provisions have been decided by the E.U Council, in order to reduce the gap between commitments, contracts and outstanding payments ;- They became now law and we have no alternative than apply them strictly - They require a better and stricter programming and organization- This means that it will be dangerous to make financing decisions (budgetary commitments without being sure that : - The beneficiary countries are prepared to sign quickly the financing agreements, otherwise these credits will be cut (rule N + 1 ) ; - The terms of reference and tender dossiers are prepared in order to launch and evaluate the tenders in time ; - The obligation to sign contracts, the latest three years after the budgetary commitments have been made, has to be respected.

18. Modifications Risks • In this context : - There is a risk that the budgetary commitments are delayed, as a consequence of the possible absence of the signature of the financing agreements one year after the budgetary commitments and the absence of the signature of the contracts three years after the budgetary commitments are radical : the credits are decommited- Some complex projects require a new organization and programming of the financing agreements. It could consist in splitting the programming, identification and formulation of a project from the implementation with two different financing agreements.

19. Modifications Article 57 • I would like also to draw your attention on ARTICLE 57 of the new financial regulation according to which : - The Commission may not entrust the implementation of funds deriving from the budget to external private-sector entities or bodies other than those to which E.U Member States have assigned a public service mission. - Therefore ; As of January 1, 2003 , it is no longer possible to set up new Project Management Units (PMU’s) where a private entity (or two co-directors as it is often the case in Asia and Latin America ) has the power to sign contracts and make payments.

20. Modifications Article 57 • This means that : - Except where authorized by Art. 54 of the New Financial Regulation (indirect centralized management), acts of public authority, including contract signing and payment, must be performed either by the Commission (centralized management) or by the beneficiary country (decentralized management). - If private PMU’s are set up, the tasks to be entrusted to them may only be technical expertise tasks and administrative preparatory or ancillary tasks involving neither the expertise of public authority nor the use of discretionary powers of judgement ( Article 57 § 2 of the new FR ).

21. Modifications PMU’s • PMU’s signing contracts and making payments must be located within the beneficiary country administration and staffed with civil servants and other agents from such administration, which amounts to decentralized management. • External technical assistance to such PMU’s is of course still possible, as long as the role of the technical assistants is limited to the tasks mentioned above.

22. Development Other development • The extension of the framework contract AMS 451 for a period of two years ; • The development of a new framework contract in the interest of the Commission : evaluation of tenders and calls for proposals ; • Information on our Website of the publication of the references of the local procurement publications.

23. Project cycle phases EuropeAid Web site • Allows consultants to search procurement notices by program and type of contract • Contract forecasts, procurement notices, Calls for Proposals, shortlist notices and contract award notices all published • Initially 200.000 to 1.000.000 pages are consulted per month, making it one of the most heavily consulted Web site on the entire Europa server

24. EuropeAid Web site

25. EuropeAid Web site

28. Project cycle phases Practical Guide to EC external aid contracts • Incorporates full text of Manual of Instructions • Provides operational detail necessary to implement Manual of Instructions • Annexes include standard tender dossiers, contracts, publication templates, Guidelines for Grant Applications and templates for letter to candidates and tenderers

29. Project cycle phases Contract award procedures Service contracts  € 200,000 International restricted tender procedure < € 200,000 but > € 5,000 1. Framework Contract 2. Simplified procedure  € 5,000 Single tender

30. Studies identification & preparation of projects feasibility studies economic & market studies technical studies evaluations audits Technical assistance technical advice manage or supervise a project Project cycle phases Service contracts

31. specify an outcome contractor provides given product global-price contracts Project cycle phases Study contracts

32. specify the means contractor performs tasks entrusted to it payment is dictated by the resources and services actually provided fee-based contracts Project cycle phases Technical assistance

33. Establish shortlist Invite and evaluate tenders from short-listed candidates Award contract Project cycle phases Restricted tender procedure

34. Phase 1: Shortlist Contract forecast Tender dossier Procurement notice Standard application form Long list Shortlist report Letter to candidates who have not been short-listed Shortlist notice Project cycle phases Standard documents

35. Instructions to tenderers Shortlist of candidates Draft contract and annexes Tender submission form Project cycle phases Tender dossier

36. Project cycle phases Key elements • Terms of reference • Award criteria

37. Project cycle phases Tender evaluation Evaluation Committee Tender opening session Evaluation • technical offers • financial offers(only for tenderers with average scores  80 points) Conclusion

38. Project cycle phases Approval Evaluation report Recommendation must be approved • award contract • cancel tender procedure

39. Project cycle phases Simplified procedure( Negotiated competitive procedure ) following the new implementing rules Requires more time than Framework Contract • no publication • full tender dossier required • minimum 30 days for submitting tenders • evaluation If < 3 compliant tenders are received, cancel procedure and start again

40. Project cycle phases Award contract • Notify successful tenderer • Sign contract • Publish contract award notice

41. Project cycle phases Cancelling a tender procedure • tender procedure has been unsuccessful • fundamental alteration of project • force majeure • all technically compliant tenders exceed the financial resources available • fair competition prevented

42. Project cycle phases Project cycle of a 2-year service contract

43. Project cycle phases Contract award proceduresSupply contracts  € 150,000 International open tender procedure < € 150,000 but  € 30,000 Local open tender procedure < € 30,000 but > € 5,000 Simplified procedure  € 5,000 Single tender

44. Project cycle phases Contract award procedures Works contracts  € 5,000,000 1 International open tender procedure 2 International restricted tender procedure (in exceptional cases) < € 5,000,000 but  € 300,000 Local open tender procedure < € 300,000 but > € 5,000 Simplified procedure  € 5,000 Single tender

45. Project cycle phases International tender procedure Supply or works contract • Publish procurement notice • Tender dossier sent to interested tenderers • Tenderers prepare and submit tenders • Evaluation Committee examines tenders • Award contract

46. Payment of non-commercial nature Promotion of an EU policy aim Implementation of an action or functioning of a body Project proposed by a potential beneficiary Co-financing - % of total eligible cost Grant beneficiary is autonomous and owner of action & results What is a grant ?

47. Programming Annual work programme Transparency Ex ante and ex post publicity calls for proposals Equal treatment Collective assessment Evaluation criteria and procedure No cumulative grants No retroactivity co-financing No profit Sound management Availability of funds Standard documents Record keeping Contract award procedures How to award grants ?

48. Local call for Proposals If 1condition is satisfied: programme budget is less than € 2,000,000 maximum grant is less than € 100,000 applications from other countries are unlikely programme is restricted to national applicants International call for Proposals in all other cases Open or restricted call for Proposals Direct Award Exceptional procedure used only in four specific cases urgency or crisis situation de jure or de facto monopoly mention in basic act joint management with an international organisation Award procedures

49. Call for proposals notice must be published in the Official Journal and on the Internet and in any other appropriate media CA arranges local publication directly (at the same time as the notice is published) Guidelines for applicants published on the Internet and hard copy includes application form and other annexes (standard contract, budget, logical framework) details the objectives of the programme priority, themes to be funded and procedures to follow by applicants Publicity

50. Eligibility : of the applicant and his partners of the project of costs Evaluation selection and award criteria management capacity and expertise relevance methodology sustainability budget and cost effectiveness Eligibility and Evaluation criteria The published administrative compliance/eligibility and evaluation grids will be binding on the evaluation committee